Dirty Secrets of American Health Care – Drug Pricing

If you need a drug to live, you will do what you need to get it. This “secret” has been exploited by drug companies for many years. Now this form of exploitation has turned particularly obscene.

Hedge fund manager Martin Shkreli took over a small drug company, Turing Pharmaceuticals, because he sensed an “opportunity.”

What was it? The anomaly, written into law by a Congress which is among the best money can buy, that the U.S. cannot control drug prices. Unlike Britain or Germany or Indonesia or anywhere else, drug companies can set the price they want – and Medicare can’t bargain.

So Mr. Shkreli went on a repricing spree. Prices did not just double or triple – they rose by orders of magnitude. One pill, daraprim, rocketed from $13.50 each – an already outrageous price – to $750. Journalists noted Mr. Shkreli felt the need to repay investors in his losing hedge fund.

Was he alone? Not even close.

Valeant Pharmaceuticals became the darling of Wall Street by buying up old, rarely used drugs – stuff that was often off patent many years. They subsequently repriced them. One, cuprimine, is used to treat the genetic disorder Wilson’s Disease, where copper accumulates in the liver. If you have Wilson’s and lack cuprimine, you die. The NY Times noted one patient, on cuprimine 55 years, whose new bill for the drug was now $35,000 a month.

Not to worry, Valent explains. “Insurance” will pay the difference. We give discounts, too. And people without any money can join our special consumer program. So this pensioner is only going to have pay $1,800 a month for cuprimine.

His wife has taken a second job.

Valeant, with its professed “duty to our shareholders” to “maximize shareholder value.” may possess the ethics of Volkswagen. But drug companies of every size have been rapidly raising prices, year in and year out, in the Unites States. The recent outrage has come from drugs, like colchicine, used for several decades, that see their prices go up ten and twenty fold. And if you’re suffering from gout, believe me, you will want your colchicine – no matter the cost.

Pricing becomes notably bizarre around drugs for “orphan” illnesses – ones experienced by rather few people. Few clients generally means few profits.

But American orphan drug legislation fixed that. So people with Gaucher’s disease could get life saving medicine – costing hundreds of thousands a year. People with narcolepsy could sleep better with xyrem – at an official price of $65,000 a year. And new drugs for relatively uncommon – and some common – tumors had prices only billionaires could contemplate.

One of my patients with a rare tumor went to M.D. Anderson. He was told he might fit the protocol for a new drug. It looked like it might work. It’s cost was $60,000 a month. He spent a great part of his time and flagging energy trying to get his insurance company to pay for it before he died.

Drug companies declare that they need these high prices to pay for R&D (forget what they include in the “development” part.) What they also don’t tell people is that most of their profits often accrue in the U.S., the pricing paradise.

Who pays for it? You and me. Insurance companies have to pass those costs on – whether they’re private or Medicare.

To keep their costs down, they need to find “savings” elsewhere. So they demand greater and greater paperwork or create new obstacles to care, allowing physicians and patients to spend half their livesjousting with “company representatives” – or they can just give up. It’s hard fighting corporations with sales of hundreds of billions – when they hold most of the cards.

Which has allowed Big Pharma to jack up prices relentlessly on drugs they hold on patent – often 10-20% a year. Or to take on rarely used generic drugs, like older antidepressants, and get a pill that once cost 10 cents zoom in price to 3 or 4 dollars.

That’s how a drug like Valeant’s cuprimine can cost 260 bucks in the U.S. – and $1 overseas.

Could any of this occur in any other industry? Could carmakers like Volkswagen jack up prices on the same vehicles three or four fold and get away with it? No. Health care resides in its own world – a world run by large corporations, lobbyists and politicians, who know that even one percent of a $2.7 trillion pie is a whole lot of money.

What can be done? Lots. There is no reason Americans should pay more for pills – or devices – than Britons or Germans. Yet that would demand realigning American health care towards improving the health of the population as a whole.

And there’s too much money to be made keeping things just as they are.